The structured finance landscape – navigating the CLOs and the private credit market

Kareem Robinson, Head of Capital Markets, Cayman Islands and Paul Belson, Senior Vice President, Capital Markets, give their views on the topics discussed at the SF Vegas conference - from the rapid expansion of private credit to macroeconomic pressures shaping investor sentiment and capital flows.

Private credit & CLOs: resilience amid change

The growth of private credit is one of the most significant structural shifts in global finance, and CLOs are benefiting directly. Middle-market (MM) CLO issuance has hit record levels, offering investors attractive spreads and stable loan performance relative to other credit products. Unlike broadly syndicated loan (BSL) CLOs, which are more exposed to broader market liquidity swings, MM CLOs continue to demonstrate resilience, with lower default rates and stronger underwriting discipline.

However, tight credit tiering means that the differentiation between top-tier and mid-tier managers is narrower than in previous years. Investors are taking a more selective approach, looking beyond headline spreads to assess manager track records, workout strategies, and the ability to manage credit stress. The focus isn’t just on returns—it’s on sustainability.

Another evolving factor is liquidity in the private credit market. While it continues to grow, there is an increasing need for better secondary market options and mechanisms to support trading and portfolio rebalancing. CLOs remain one of the most efficient ways to deploy capital in this space, but with spreads tightening, capital deployment strategies must be more deliberate and forward-thinking than ever.

Macroeconomic pressures: inflation, tariffs & global uncertainty

Beyond structured finance, the macroeconomic backdrop is shifting rapidly, bringing a mix of challenges and opportunities. Inflation remains a central concern, forcing central banks worldwide to walk a fine line between stabilising growth and managing price pressures. While the Federal Reserve’s post-rate-cut stance signals a cautious approach, it hasn’t eliminated uncertainty—particularly around future policy moves and their impact on credit markets.

Trade tensions are also back in focus. New tariffs, ongoing supply chain disruptions, and geopolitical uncertainty are reshaping how businesses operate, impacting issuer fundamentals and investor sentiment. With global economies becoming increasingly interconnected, fluctuations in trade policy aren’t just affecting the traditional manufacturing sector—they are filtering into financial markets, affecting everything from corporate credit health to structured product performance.

Meanwhile, currency volatility is another factor that structured finance professionals must consider. Shifts in exchange rates can impact cross-border investment flows, particularly for international investors allocating capital to U.S. CLOs. While the U.S. dollar remains the dominant currency in structured finance, its relative strength or weakness can influence funding costs, hedging strategies, and overall risk appetite in ways that shouldn’t be overlooked.

With political and fiscal policy uncertainty in key global economies, investors are adjusting their risk models and portfolio allocations to account for potential volatility. The challenge ahead is balancing cautious positioning with the need to generate returns in an environment that continues to evolve.

Fund finance & liquidity solutions

Another major theme at SFVegas was the evolution of fund finance and liquidity solutions. Private credit fund finance is expanding rapidly, with more funds utilising NAV facilities and rated feeder funds to optimise capital efficiency. These structures allow funds to unlock liquidity while maintaining exposure to core assets, a trend that has been accelerating as private credit matures as an asset class.

What’s driving this shift? Competition among lenders is increasing, leading to more borrower-friendly deal terms. Traditional banking constraints have opened the door for alternative financing structures, enabling private funds to access liquidity more efficiently. At the same time, the growing securitisation of fund finance is creating new investment opportunities for structured credit investors.

This trend has significant implications for the broader CLO market. As private credit funds gain more financing flexibility, it will likely influence CLO issuance and structuring, creating potential new opportunities for investors and managers alike.

The road ahead: agility & adaptability

As we move deeper into 2025, agility and adaptability will define success in structured finance. The interplay between global macro trends, monetary policy shifts, and structured credit market conditions will shape issuance levels, risk appetite, and investment strategies.

CLOs have historically proven resilient through economic cycles, but the key differentiator in today’s market is manager discipline. Selecting the right assets, managing risk proactively, and maintaining portfolio flexibility will determine who thrives in this evolving landscape.

With capital continuing to flow into private credit, investors must stay ahead of macroeconomic developments—from inflation trends to geopolitical risks—to make informed, strategic decisions. The firms that succeed will be those that embrace data-driven insights, dynamic risk management, and an adaptable approach to structuring deals in an ever-changing environment.

One thing is clear: economic uncertainty is defining 2025, but that isn’t necessarily a negative. For those who are prepared, volatility creates opportunity. CLOs remain at the centre of the conversation, offering a proven, efficient structure for investors seeking yield in a shifting environment. But as capital continues to flow into private credit, the real differentiator will be how managers navigate risk, adapt to tighter spreads, and respond to macroeconomic shifts.

If you would like to find out more about Ocorian's CLO and securitisation expertise and comprehensive cross-border global client driven capital markets solutions, please feel free to contact us.